Azerbaijan, Baku, Nov. 30 /Trend N.Ismayilov/
There are some problems in the banking sector of Azerbaijan that must be solved to enhance its development, said the head of the Azerbaijan Bank Training Center (ABTC) Javanshir Abdullayev in interview to EcoVision magazine, published by the Azerbaijani-Turkish businessmen association (ATİB).
"The banking sector of Azerbaijan compared to other areas of the economy is the most developing, institutionalized and regulated, but still has problems, which can be divided into two groups - outsectoral and insectoral factors," Abdullayev said.
According to Abdullayev, outsectoral factors include the problem of incomplete financial market formation, the lack of financial instruments, which creates problems for the effective management of liquidity. The lack of credit bureaus, allowing to correctly identify the credit status of borrowers, the low proportion of non-cash payments and a high level of non-bank circulation of money, problems with the assignment of collateral and financial education of borrowers is also indicated among the problems in this subgroup.
"Despite the fact that the country has implemented a special government program to stimulate the growth of non-cash payments, cash payments for today still dominate. This has a negative impact on turnover and profitability of banks," Abdullayev said.
With regard to collateral assignment, Abdullayev noted that it primarily affect the quality of banks' loan portfolio.
"The process of assignment of collateral is a lengthy process according to legislation," Abdullayev noted "After the appropriate judicial procedures, sale of collateral is held in auctions but there are few companies providing such services, so the cost of services is high. The process between the filing of application and sale of the property is long, and mechanism for collecting interest on the loan during this period has not yet fully developed."
According to Abdullaev, the insectoral factors include poor human capital formation, domestic institutional processes, the processes of self-regulation and sectoral institutionalization.
"Unfortunately, there are still a number of banks that do not meet international standards of corporate governance," Abdullayev said.
There are 44 banks operating in Azerbaijan.